Item IV. B.2.d.
Proposed Policy on the Use of the Memorandum of Understanding
(Independent Contractors paid less than $5,000.)
A: PURPOSE
To establish a policy and to guide project directors and others in the use of Independent
Contractors who are to be paid in an amount less than $5,000 on projects and accounts
administered by the Research Foundation.
B: DEFINITION
An Independent Contractor is an individual or firm providing specific, personal services
free from the direction and control of performance, including the means and methods
used to accomplish the work. The general rule is a test of control, i.e. that an individual is
an Independent Contractor if the entity for which the services are performed, has the right
to direct only the result of the work and not control the manner or method of
accomplishing that result.
C: APPLICABILITY
This policy applies to all project and Research Foundation accounts that will pay for the
services of an Independent Contractor in an amount less than $5,000.
D: BACKGROUND
Grants and contracts are awarded to the Research Foundation with the assumption that
there is the staff and technical expertise to carry out the project without extensive outside
assistance. Occasionally, Independent Contractors supplement a project’s technical needs
and provide specific services to the Research Foundation.
Independent Contractors fall into two categories:
1. A company or firm providing service to the public or to a broad clientele. This includes
organizations supplying temporary office services.
2. Individuals who are clearly in business for themselves and offer their services to the
general public, and as such are self-employed, e.g. accountants, lawyers, physicians,
photographers, artists, and other professionals as well as those in an independent trade or
business. This includes one-time professional lecturers. As a rule, if the determination is
unclear, the prospective individual/consultant should be classified as an employee.
The IRS employs a number of factors to appropriately classify Independent Contractors.
Determinations are made on a case by case basis. Some of the IRS factors are listed
herein but for further guidance the project director may access the IRS website at
IRS.gov and read Publication No.
Note, that the final determination as to the
appropriate classification of the Independent Contractor will be made by the Research
Foundation.
Factors supporting employee classification:
1. The work to be performed is substantially similar to the work of other employees.
2. The services to be provided are generally performed by or incorporated into the
operations of the college or the Research Foundation.
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Item IV. B.2.d.
3. The individual will require on-going training and direction regarding how to complete
the task, or the individual will receive more than simple general directions and statement
of objectives.
4. The individual will report to a Research Foundation or CUNY employee who has the
right (even if such right is not exercised) to direct how, when, and where the individual
does the work.
5. Space, equipment or supplies will be provided.
6. Work is to be done on a regular schedule (i.e., from 9:00 a.m. to 5:00 p.m.).
7. The time period for payment is on a weekly or monthly basis.
8. The individual, similar to an employee, can terminate his services without creating a
liability.
9. There is a continuing relationship or prior relationship between the individual and the
Research Foundation or the college, either as an employee or independent contractor.
Factors supporting an Independent Contractor classification:
1. Independent Contractor maintains a separate business with its own premises, materials
and equipment.
2. Independent Contractor offers its services to the general public and can provide
documentation of other clients.
3. Independent Contractor has obtained or has applied for a federal employer
identification number (EIN). Independent Contractor’s often have employees working for
them.
4. Independent Contractor agrees to specific work for a specific amount of money (i.e.: a
fixed fee, hourly/daily rate) and controls the means of performing the work.
5. Independent Contractor may realize a profit or suffer a loss in connection with
performing the work or services. Independent Contractors may suffer a liability for
failure to complete the scope of work.
6. Independent Contractor has right to control how, when and where the services are to
be performed.
7. Independent Contractor is NOT an employee of CUNY or the Research Foundation.
8. Independent Contractor does not have a continuing relationship with the college or the
Research Foundation.
E.POLICY
1. Project directors must be aware of the requirements for Independent Contractors and
indicate their proposed use in grant applications or contract proposals.
2. Unless the budget is flexible, a specific budget category with sufficient funds must
exist before engaging any Independent Contractor. Even in awards with flexible budgets,
using consultants may be prohibited by the sponsoring agency if they are not specified in
the project proposal. Approval of the individual (or firm) by the funding agency may be
required by the terms of the award or agency regulations. Please check your award
documents.
3. A written agreement establishes the basis for payment to an Independent Contractor.
The services to be provided, (Scope of Work- Attachment A), period of performance and
amount to be paid must be specified in the MOU.
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Item IV. B.2.d.
4. Except in unique circumstances, the Foundation will not advance payment to
Independent Contractors for personal services.
5. Use of both outside and intra-university consultants is subject to government
regulations, in addition to Research Foundation, CUNY and sponsor restrictions.
F. PROCEDURE
Before engaging an Independent Contractor, the project director should determine that
the expense is allowable under funding agency and Foundation policies and that funds are
available. Any prior approvals required by award or agency regulations must be obtained.
1. The Project Director should complete RF Form 804, Memorandum of Understanding.
The Memorandum of Understanding Form (RF Form 804) must be submitted with the
appropriate accompanying documents: the Independent Contractor’s List of Clients,
Scope of Work, Original Invoice, Payment Request and a J-1 Visa and I-94, if applicable.
It is to be signed by the Project Director and by the Independent Contractor. and attach
the appropriate supporting documentation.
2. The MOU is to be signed by the Project Director and the Independent Contractor and
sent to the Research Foundation’s Department of Procurement and Payables accompanied
by the Independent Contractor’s invoice and a signed Payment Request.
3. Invoices should include billing rate, amount due, dates and type of service,
and certification that deliverables have been received, if applicable.
G. IMPLEMENTATION
The provisions of this policy are effective January 1, 2007.
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